business news in context, analysis with attitude

The Hollywood Reporter writes that "Amazon is facing a lawsuit accusing it of misleading Prime subscribers by charging them an additional fee to stream movies and TV shows without ads."

The proposed class action suit, filed in California federal court, "claims breach of contract and violations of state consumer protection laws on behalf of users who saw the terms of their subscriptions with Amazon change when it pivoted to making its ad tier the default for its over 100 million subscribers."

Amazon announced the addition of the ad-free tier, with an extra charge of $3 a month, last year, and then implemented it last month.

Some context from the Hollywood Reporter story:

"The proposed class action seeks at least $5 million and a court order barring Amazon from engaging in further deceptive conduct on behalf of users who subscribed to Prime prior to Dec. 28, 2023. It brings claims for breach of contract, false advertising and unfair competition, among other alleged violations of consumer protection laws in California and Washington.

"Last year, the Federal Trade Commission sued the tech giant for allegedly duping consumers into signing up for its Prime service and then impeding them from canceling their subscriptions. The suit argued Amazon employs a “manipulative” and “coercive” interface to trick users into enrolling in automatically renewing subscriptions. It also alleged that many subscribers intended to sign up solely for Prime Video, which is a lower-cost option.

Prime is considered a vital part of Amazon’s retail dominance because it keeps users locked into the company’s marketplace by offering them perks, including access to Prime Video, according to the FTC.

"Amazon was also sued in 2020 for unfair competition and false advertising over the company reserving the right to end consumers’ access to content purchased through Prime Video. A federal judge in 2022 dismissed the proposed class action, siding with Amazon on arguments that its terms of use tell users that movies and TV shows they purchased may become unavailable due to provider licensing restrictions."

In a related story, The Verge reports on another unilateral decision by Amazon:

"Amazon has confirmed it’s not a mistake — your Amazon Prime Video subscription no longer includes Dolby Vision HDR or Dolby Atmos surround sound. That’s on top of the ads that Amazon injected into the service on January 29th. Now, when you pay $2.99 a month to remove those ads, you can get Dolby Vision and Dolby Atmos back as well.

"That’s the word from 4KFilme, which discovered that their smart TVs from Sony, LG, and Samsung were now displaying content in HDR10 with Dolby Digital 5.1 as opposed to the higher fidelity options they’d enjoyed previously.

"Amazon spokesperson Katie Barker confirms to The Verge that it’s a deliberate move: “Dolby Vision and Dolby Atmos capabilities are only available on the ad free option, on relevant titles.”

KC's View:

I hate to say I told you so.

But I told you so.

This is one I actually got right - I said last year that it was not hard to imagine that a class action suit would be filed challenging Amazon's unilateral decision.

(I'd expect another class action suit one of these days over the Dolby issue.)

I'm no contract lawyer - I would be a better and smarter man had I actually taken Professor Kingsfield's class (a cultural reference about seven members of the MNB community are likely to get) - but I said from the beginning that the optics would have been a lot better for Amazon had it been a phased-in approach, changing the contract terms when customers' contracts came up for renewal.

It also might have been smarter for Amazon to simply add a slightly lower-cost tier that would include advertising in Prime programming.

Money-grabs don't work that way, though.  Amazon wanted to drive bottom line revenue, which would in turn drive up its stock price.  That's what you do on Day Two.  Or Day Three.